Fast track to the American dream

— Amid the skyscrapers and coal power plants in this fast-growing manufacturing city of nearly 13 million people, eager investors filed into a convention center that thumped with dance music from a Florida beach party video.

On sale was the dream of life in America, packaged for wealthy Chinese willing to bet a half-million dollars on the opportunity offered by a U.S. visa program called EB-5.

Want to hunt for gold in California? For $500,000, investors were told they could stake a claim in a long-dormant mine north of Sacramento, and at the same time get a jump-start on the path to U.S. citizenship. Nearby, a miniature model of a Louisiana oil field held out the same promise. And a few steps away, a poster showed a girl enjoying ice cream and asking in Chinese: "Mama, shall we invest in one of the Twistee stores and stay forever in America?"

The business ventures are among hundreds in the United States — including restaurants, senior homes and hotels in the Chicago area — that compete in a rapidly growing market for conditional residency visas offered to foreigners who invest in developments that promise to create American jobs. If 10 jobs are created, an investor and his family can qualify for legal permanent residency and leap ahead on a path to eventual citizenship.

The EB-5 program is credited with kick-starting such varied ventures as ski resorts in Vermont, dairy farms in South Dakota and the future home of the Brooklyn Nets NBA team. But it also has been dogged by allegations of fraud against both U.S. developers and foreign parties.

Officially, most of EB-5 remains a pilot program, competing for wealthy foreign investors against similar programs in Canada, Australia and other parts of the world. But since it began in 1990, 12,000 visas have been granted to foreign investors and their families from more than 100 countries.

Those investors have poured $2.2 billion into projects in the United States — from a convention center that turned around a rundown area near Philadelphia's downtown to a boutique hotel in Dallas inside what used to be the home of a coffin manufacturer.

Overall, 46,000 jobs have been created through the program, according to U.S. Citizenship and Immigration Services, the federal agency that administers the program.

The program has grown fastest in China, where many of the country's estimated 960,000 millionaires have found new wealth at about the same time the 2008 economic collapse in the U.S. led banks to clamp down on loans, leaving developers scrambling for new sources of capital.

This year alone, the EB-5 program is expected to generate 6,000 visas for foreigners, most of them from China. The Obama administration and some members of Congress are pushing for permanent authorization when the program expires in September.

"There seems to be a real hunger for these projects to work because of the promise that they give," said Audrey Singer, a senior fellow at the Washington-based Brookings Institution who researches EB-5-financed developments. But "things can go horribly wrong," Singer added, citing several ongoing federal lawsuits alleging Ponzi schemes and other deceptive practices.

The program's enticement, for both the investors and those pitching the projects, is obvious.

"You can actually own your own McDonald's restaurant in the United States," developer Brian Hall told a mother and daughter, his Alabama accent rising above the hum of the Tianjin conference crowd. Hall was trying to persuade the women to invest in a fast-food franchise — or how about a new ferry boat service between Florida and Havana?

The daughter, Guo Wen, 30, smiled, introducing herself as "Peggy."

"I have an aunt named Peggy!" Hall replied, stepping closer. "Do you want to emigrate to the U.S.?"

Much of the program's growth is driven by privately run limited liability companies in the U.S. that — through a pilot portion of the program launched in 1993 — are authorized by the federal government to broker EB-5 transactions. There are 224 of those companies, known as regional centers, compared to just 25 in 2008, according to U.S. Citizenship and Immigration Services.

Three such companies operate in Chicago, with a fourth in Peoria and a fifth in LaSalle County, all of them vying for investors across the globe.

One local regional center is seeking as much as $250 million through the EB-5 program to build a five-hotel Chicago convention center near O'Hare International Airport. Another is financing the development of elder-care homes in suburban Aurora, Elgin and Wood Dale, among other locations.

Bryan Zises, 44, was at the Tianjin conference to meet people who might help him find EB-5 financing for projects in Chicago that include a $50 million renovation of the landmark Chicago Athletic Association buildings near Grant Park.

Zises — whose day job is chief of staff of the Illinois Housing Development Authority — says the EB-5 program has become littered with questionable schemes that fail to create jobs or provide green cards for investors. In Tianjin, he surveyed the conference activity and said: "I can't believe some of these people are selling these projects with a straight face."

The program's successes have recently been overshadowed by accusations of fraud and federal lawsuits.

In New Orleans, for instance, foreign investors have accused principals of a regional center of diverting $13.5 million into sham companies that funneled the money back to the principals. Other federal civil lawsuits accuse regional centers of pushing investors into overly risky deals while collecting fees on the transaction.

"The best analogy I can think of is the subprime mortgage crisis," where predatory lenders were accused of similar activity, said Ann Lee, a senior fellow at the Demos public policy group in New York who has tracked the program's growth in China.

"There is a danger that if the (Obama) administration ... is turning a blind eye to all of its problems, then this could be an area where you have serious financial fraud and other major issues," Lee said. "Instead of being a way to promote better relations (with China), it can actually have the opposite effect if they don't fix it."

U.S. Citizenship and Immigration Services officials said the agency recently increased its staff of inspectors and has begun working with the Securities and Exchange Commission and other federal agencies to root out questionable cases.

Sen. Patrick Leahy, D-Vt., who is sponsoring legislation to make the regional center portion of the program permanent, says fully authorizing EB-5 would lead to better oversight, though the bill he introduced in May does not call for increased scrutiny.

Leahy's office declined to make the senator available for an interview last week. Last December, the senator acknowledged during a congressional hearing about the program that "there is always room for improvement."

In China, brokers authorized by the Chinese government to serve as gatekeepers for both local investors and regional center representatives have been accused of deception. The roughly 180 companies that employ the brokers charge the American regional centers as much as $60,000 to promote projects to Chinese investors, according to the head of a Beijing-based umbrella group for those companies.

In addition, the companies charge the investors themselves as much as $12,500 in fees and sometimes collect lucrative commissions from the regional centers when investors sign on, said Charles Qi, president of the Beijing Entry & Exit Association.

Often those arrangements are doomed to fail, Qi said, noting scores of cases in which investors put money into projects that ultimately did not create the required number of jobs. "At least 50 percent of Chinese applicants to this program will lose their money and will (never get) their green card," Qi predicted.

Statistics from China are unavailable. But overall the program seems to work for most foreign investors. Just 16 percent of investors granted an EB-5 visa since the program's inception did not later qualify for legal permanent residency, according to U.S. Citizenship and Immigration Services, while nearly 26 percent of those who invested money in projects were found ineligible for an EB-5 visa.

Still, Punyu Ho, a Chicago-based financial adviser, said some of his company's wealthy Chinese clients have been burned after investing through EB-5. During trips to China, Ho attends weekly seminars in Beijing, Shanghai and other cities, highlighting specific projects open to EB-5 investment.

"You don't know what to believe," said Fu Haiwen, 24, an owner of a Hong Kong comic book company who is investing in an elderly care center in Crivitz, Wis., directly through a Chicago developer. Ho said Chinese brokers frequently suggest — sometimes using only a photo op — that a venture has been endorsed by the U.S. government. "The Chinese, they believe in government," Ho said.

U.S. Citizenship and Immigration Services Director Alexander Mayorkas said his agency has improved its oversight of the program. In addition to hiring more staff and working with other federal agencies, Mayorkas said, his agency has heightened its efforts to ensure that the "source of funds" for an investment is legal.

Earlier this year, news broke that a Mexican government official wanted for embezzling several million dollars from his government had secured an EB-5 visa to escape into the U.S. In China, there have been news reports of corrupt government officials parking their assets abroad through EB-5 and other immigrant investor programs.

"What is of critical importance to us as an agency is whether the representations that are made to us ... are truthful," Mayorkas said.

Despite the concerns, about 2,000 investors attended the immigration expo in Tianjin, on the coast of the Bohai Sea about an hour from Beijing by bullet train.

Inside the convention hall, guests were greeted by a honeycomblike array of promotional displays. The EB-5 section, by far the largest, featured a mix of proposals for restaurants, senior centers, hotels and other ventures that aimed far higher.

At a booth with a picture of the Chicago skyline, Heidi Li, a director at the Chicago Educational Association, sought to sell a couple on the merits of investing in new classrooms and programs at the College of Chicago, a small school for foreign students.

Instead, she fielded questions about the city's South Side.

"It's not unsafe," Li assured them in Mandarin.

Carrying her 2-year-old daughter, Liu Shujing walked out of the conference eager to start a new life in the U.S., away from the heavy Tianjin smog that paints the horizon a rusty brown and leaves a pungent taste on the lips.

"We're looking for a higher standard of living and, also, a breath of fresh air," Liu said through an interpreter.

At the booth where she was offered the choice between a McDonald's or a ferry boat service to Cuba, Guo Wen, an accountant with Motorola, marveled at the world of possibilities opening before her.

"It's like a supermarket," Guo said, giddily. "Yeah, you can choose what you like!"